Question

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Corporation issued $ 600,000 of 7 %, 12 -year bonds payable on March 31, 2019. The market interest rate at the date of issuance was 10 %, and the bonds pay interest semiannually. The Corporation's year-end is March 31.

3. Record issuance of the bonds on March 31, 2019 , and payment of the first semiannual interest amount and amortization of the bond discount on September 30, 2019. (Record debits first, then credits. Exclude explanations from any journal entries.)

Answer 1

Solution 1:

Chart Values are based on:
n= (12 Years*2)	24	Half years
i= (10%/2)	5%	Semi annual
Cash Flow	Table Value	*	Amount	=	Present Value
Par (Maturity) Value	0.310068	*	$6,00,000	=	$1,86,041
Interest (Annuity) [$600,000*7%*6/12]	13.798642	*	$21,000	=	$2,89,771
Price of Bonds					$4,75,812

Solution 2:

Discount on Bonds = $600,000 - $475,812 = $124,188

Bond Amortization Table
Semiannual interest Date	Interest Payment	Interest expense	Discount Amortization	Discount Account Balance	Bond carrying amount
31-Mar-19				$1,24,188	$4,75,812
30-Sep-19	$21,000	$23,791	$2,791	$1,21,397	$4,78,603
31-Mar-20	$21,000	$23,930	$2,930	$1,18,467	$4,81,533
30-Sep-20	$21,000	$24,077	$3,077	$1,15,391	$4,84,609

Solution 3:

Journal Entries - Golf World Inc.
Date	Particulars	Debit	Credit
31-Mar-19	Cash A/c Dr	$4,75,812
	Discount on Bond Payable Dr	$1,24,188
	To bonds payable		$6,00,000
	(Being bond issued at discount)
30-Sep-19	Interest Expense Dr	$23,791
	To Discount on Bond Payable		$2,791
	To Cash		$21,000
	(To record first payment of Interest and Amortization of discount on issue)